"Indian Prime Minister Modi presents proposed tax reductions amidst escalating Trump tariffs, sparking criticism of perceived unfairness and lack of justification"

Indian Prime Minister Narendra Modi has announced a proposal to slash consumption taxes on everyday goods, a move aimed at reducing the tax burden on the common man and boosting domestic consumption. The policy, if approved by the GST Council, could deliver billions of dollars in annual relief and potentially shore up demand in India's economy.

The GST Council, chaired by Finance Minister Nirmala Sitharaman, includes representatives from all Indian states. The decision to implement the proposed tax cuts on goods and services must be approved by the council before nationwide implementation can occur. However, achieving broad consensus within the council has been a challenge in the past.

The proposed tax cuts come as Modi has been vocal in his criticism of US tariffs, calling them "unfair, unjustified, and unreasonable." The state of US-India trade negotiations remains uncertain, with US negotiators reportedly postponing a planned late-August visit to the Indian capital.

If approved, the GST tax cuts could strain public finances, according to experts. However, analysts at Emkay Global Financial Services and Motilal Oswal, an Indian financial services firm, argue that the benefits to various sectors and "sizeable savings" to households would outweigh the financial strain.

Deepanshu Mohan, economist at OP Jindal Global University, stated that the GST readjustment is Modi's way of ensuring the middle class has enough resources. Mohan also noted that the GST adjustment is an acknowledgement that India's economy has not worked for its low middle-income class for some time.

The GST proposal is a response to the ongoing US-India trade tensions and Trump's tariff threats. Under Modi's reforms, most goods would fall into either a 5% or 18% tax bracket. If the US and India fail to sign a trade deal, Trump's tariffs could drag India's GDP growth below 6% this fiscal year, according to economists.

The US tariffs could lead to plunging orders and severe job losses for Indian exporters. However, the GST proposal comes ahead of expected elections in Bihar, a key political battleground for Modi. The growing interest in US, West African, and Latin American crude is more indicative of greater flexibility, not a deliberate pivot away from Russian oil, according to trade intelligence firm Kpler.

Until there's a clear policy shift or sustained change in trade economics, Russian flows remain a core part of India's crude basket, according to Kpler analyst Sumit Ritolia. The analysts at Emkay Global Financial Services and Motilal Oswal call the policy a "welcome reform towards boosting domestic consumption."

In conclusion, Modi's proposed changes to the goods and services tax (GST) would make most goods cheaper for consumers and potentially stimulate domestic demand. However, the fate of the tax reform proposal depends on the GST Council, which has struggled to achieve broad consensus in the past. The proposal is also a response to the ongoing US-India trade tensions and Trump's tariff threats.